Online sales will reach $11.5 billion in the fourth quarter, 32% higher than last year’s fourth quarter, projects consultants Retail Forward Inc., the former PriceWaterhousecooper's Retail Intelligence System operation, in a report due out next week. Total retail sales will grow only 1.5%, Retail Forward projects.
“Even though the economy is weakening, we’ll see continued growth in retail e-commerce sales,” says Frank Badillo, senior retail economist with Retail Forward. Fourth quarter 2000 online sales totaled $8.9 billion.
Online retailing can support such substantial growth because even five years into e-retailing’s development, such growth is coming off a small base. “It is still really a small slice of total retail sales,” Badillo says. If online sales reach $11.5 billion, they will account for about 1.3% of projected retail sales in the fourth quarter.
Retail Forward says this fourth quarter could be the weakest holiday season since the recession of 1991. Last year’s Q4 year-over-year growth was 4.5%. The anemic growth is the result of the terrorist attacks and weakening job market.
Prices also will not hold, the company says. “The impact of retail prices, which have been falling at about a 1% annual rate in recent months, is being magnified by high inventories in some retail channels and a super-competitive retail environment in the face of softening consumer demand,” Retail Forward says. “This price deflation – a stark contrast to the 3% retail price inflation during the recession of 1991-–will mean great buys for consumers, but will dampen sales growth and profits for retailers.”
Retail Forward economists also said:
--Apparel retailers should fare the worst as they face comparisons to relatively strong apparel demand a year ago, receding consumer demand for apparel this year – particularly for readily deferrable, discretionary purchases – and downward price pressure as they struggle to keep inventories down.
--Retailers that sell home goods – such as home improvement stores, furniture stores and consumer electronics stores – should see sales growth hold steady or improve as they benefit from persisting strength in the housing market.
--Sales growth at discount retailers should be cushioned as more shoppers turn to them for value prices in response to the challenging economic environment. Supermarkets should also see the softening in their sales cushioned as consumers curb their spending at restaurants.
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